Obsess Over the Commission At Your Own Risk

Obsess Over the Commission At Your Own Risk, Others Obsess About Serving Clients, Creating An Efficient CRE Marketing and Improving their Community.

By, Jerry LoCoco

Contrary to popular belief, there are Commercial Real Estate (“CRE”) brokers/companies not focused primarily on commissions. No, their interests and goals are much more significant in scope than compensation alone. This mindset is one that results in the best product/services for clients, markets, and communities. These brokers realize that they play a key role in their communities. These brokers hold the interest of clients and their community above all else.

The following are four traits exhibited by these CRE brokers/companies who employ this mindset.

Client Interests First: 50% of the Commission 100% of the Time:

In fact this is the second of ten core covenants within the SVN organization. Further, as part of cooperating and placing the client’s best interests at the forefront of the transaction, SVN brokers share 50% of the commission with a procuring broker 100% of the time. Compare that with brokers who don’t offer a co-broker fee at all or even those who take that extra half or full point for themselves. Think about the motivations of such actions. Do these actions create value for the client? Not so much! Do these actions help promote the uninhibited trade of information, the foundation of an efficient CRE market? Negative. Do these actions reduce the barriers to deal velocity, an essential element in a vibrant CRE market and community? Most certainly not! Final question. Who do you think the consumer will choose in a listing presentation? The brokerage with a reputation for not sharing commissions equally with the brokerage community or the brokerage with whose core covenants and mission statement promote the equitable distribution of commission? Brokers who place their clients interests first don’t always win the assignment, but they do win 100% of the time when placing the client/community’s interests first.

One word of advice for all new brokers: DO NOT ADOPT THE SCARCITY MINDSET, share fees equally, even if it’s with a broker who does not reciprocate. Show the market that you’re a professional who places the client and market’s interests first. You will stand out in the market as a difference maker, a client centric community minded CRE professional while others fade, consumed by obsession over commissions.

Primary Motivation: Improving their Community:

We’ve all been there when we ask ourselves, “why did I take on this low priced problem ridden listing/buyer requirement?” The answer is simple; much like law enforcement that removes criminals from the street, as CRE professionals, particularly in tertiary markets, it’s our duty to remove blighted/underutilized properties from the community. Achieving this requires creative ideas to put properties back into productive use either through renovation or redevelopment. Think about it, if CRE professionals are not being creative with their listings/client needs, then who else has the skillset necessary to find creative solutions for properties that often times become a liability for a community? Again, it’s the CRE professional who understands planning & zoning, construction, development, and lending. CRE professionals have the ability to put the property in capable hands. Whether a creative plan for an owner/user or developer, such action is imperative to the success of the community. Without professional CRE broker action, the property sits further declining in value, reducing surrounding property values, and becoming a blight and financial drain to the community.

One word of caution, we are in business to be profitable and stay in business so you can’t fill your pipeline with these types of deals! However, remember that as a CRE professional, your community is counting on you to take on some of these listings/buyer assignments, it’s imperative to the success of the community, which at the end of the day is directly related to your success as a CRE broker.

CRE Velocity and the Difference Between A Flowing Stream and Stagnant Pond:

“Velocity” within the context of CRE is essentially the number of properties within a specific asset class that exchanges hands within a given year. Professional CRE brokers understand that higher velocity typically indicates higher capital flow into a specific market. Why are capital flows so critical to a community? The analogy of a stream and pond is very telling with respect to this question. For example, a community with low velocity and low capital inflow is much like a stagnant pond, ripe with decay and clearly not indicative of a healthy environment. In this type of market, when CRE prices stagnate/decline, the community experiences flat or negative population growth, declining retails sales for construction/supplies etc., and all result in a lower property tax and sales tax base. You get the picture, very similar to a stagnant pond. Whereas, a community with higher velocity experiences capital inflows, analogous to a healthy flowing stream.

Imagine if you will a community with capital flowing into the CRE market from various regions in the country. In this scenario, capital inflows drive CRE sales, property and sales taxes, and overall growth. The point here is not about ponds and streams, the point is that professional CRE brokers, true market leaders and professionals, understand their important role in the market and constantly evaluate how their team/business promotes velocity within their respective market(s).

Constantly Improving and Learning their Craft:

As stated above, professional CRE brokers have a working knowledge of planning & zoning, construction, development, and financing. Not to mention CRE brokers need to understand human psychology, negotiations, and a thing or two about the specific asset class in the transaction! Again this profession, when treated as more than a hobby, involves a broad range of skillsets; you need much more than keys and comps! How can one person possibly know all of this information? Acquiring this working knowledge requires a commitment to constant and never ending improvement and understanding. The dynamic CRE business is constantly evolving and so too must CRE brokers. Although somewhat overwhelming, a desire to constantly improve and the desire to improve the client’s experience is what drives CRE professionals through the pitfalls and challenges in the CRE business.